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Current trends in Structured Products markets

Structured products are customized to meet specific needs that cannot be met from the standard products available in the markets and a large number of them are derivative products. They are highly multifaceted and interlinked and hence carry higher levels of risks

An insight into the current trends in Structured Products reveals the following interesting developments

Markets

  • Tighter credit conditions
  • Elevated volatility
  • Both resulting in increased cost
  • Credit rating of the issue and issuer
  • Number of innovations are taking place
  • Lower volatility underlying assets are becoming popular
  • Market neutral / long / short / volatility capped / algorithmic strategies are becoming the order of the market

Products

  • Product development and competitive environment
  • Regulatory and fiscal changes impact the market
  • Emerging opportunities in ETF investments
  • Emerging trends in wrappers and underlyings
  • Investors continuing to consider alternative investments in their portfolio

Preferences

  • Capital protected products remain the most popular choice
  • Focus on primary needs of flexibility, income and protected leverage
  • Optimization of risk management
  • Cross asset approach on structured products, research activities
  • Preference for enhanced transparency, liquidity and reporting

What the investors are looking for

  • simplicity and clarity on top of security
  • payoff simplicity and transparency
  • compliance with regulations in terms of credit and counterparty risks
  • Thematic ideas (emerging markets, volatility)

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2 Responses to “Current trends in Structured Products markets”

  1. N
    June 11, 2012 at 3:54 am #

    Nice blog!!! One more thing to add – the customer ( retail customer more so )would also want to look at the liquidity aspects and what sort of secondary markets are available to him incase he wants to offload his assets and get read money.

  2. arvindh kumar
    June 14, 2012 at 4:03 pm #

    In my view, structured products are a bit highly complex and naturally, retail customers may not like to trade in them. Structured products are not even for domestic, local banks who are not into global space. Structured products are basically for high net worth individuals, global banks, wholesale banks, hedge funds and investments – mainly those who are interested in proprietary trading and who can afford.

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